A Massive Transfer of Wealth from Baby Boomers May Not Live Up to Expectations
A massive transfer of wealth from baby boomers to younger generations is currently taking place. However, a closer look reveals that many individuals may not receive the inheritance they anticipate. The exorbitant cost of healthcare is expected to deplete the wealth of most boomers before it can be passed on to Gen Xers and Millennials, according to an analysis by CNBC.
The Overwhelming Cost of Healthcare in Retirement
One significant factor contributing to this phenomenon is the overwhelming cost of healthcare in retirement. A report from Fidelity highlights the amount individuals need to have saved in order to cover their medical expenses. The findings suggest that:
- Single people who turn 65 years-old in 2023 may require approximately $157,500 saved after taxes for healthcare expenses in retirement.
- Couples will need $315,000 saved for the same purpose.
The Current State of Retirement Savings
In contrast, a survey conducted by the Transamerica Center for Retirement Studies provides insight into the current levels of retirement savings among different generations:
- Boomers Median Savings – $289,000
- Gen-Xers Median Savings – $82,000
- Millennials Median Savings – $49,000
Given these figures, it becomes clear that while the wealth transfer is indeed happening, most individuals will not receive a substantial amount. CNBC questions who will have enough wealth to withstand the financial burden of illness.
The Role of High-Net-Worth Households in Wealth Transfer
A study conducted by wealth management firm Cerulli Associates reveals that 42% of the great wealth transfer will come from high-net-worth and ultra-high-net-worth households, which account for only 1.5% of all households. This indicates that a small percentage of the population will be responsible for a significant portion of the wealth transfer.
The Impact of Healthcare Expenses on Wealth Transfer
Despite the widespread anticipation of a substantial wealth transfer, healthcare costs pose a significant obstacle to this process. The high expenses associated with medical care for the elderly often deplete their life savings, leaving little to pass on to future generations.
Hot Take: The Harsh Reality of Healthcare Expenses
A massive transfer of wealth from baby boomers to younger generations is underway. However, the overwhelming cost of healthcare poses a significant challenge to this process. While many people expect to receive a substantial inheritance, the reality is that healthcare expenses can wipe out most of the wealth before it can be passed on. As a result, individuals may not receive what they anticipate from this wealth transfer.
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